The stock market has been on a tear over the past year. All the top market indexes have soared to new highs recently, but there are some notable names that are trading at discounts. Here are two stocks trading well below their highs that could rebound in the coming year.
1. Nike
Nike (NYSE:NKE) is a top brand in a growing sportswear market, but its share price is trading down 50% from its previous peak due to weak sales performance. The company has a good shot at a turnaround after recently hiring former business veteran Elliott Hill as its new CEO.
Although Hill won’t start until October 14, Nike is already making progress on a turnaround strategy. The company is in the process of cutting $2 billion in costs over three years, which could have a significant impact on shareholder returns. Nike started these cost cuts last year, leading to 15% profit growth in fiscal 2024.
The strong demand for Nike’s fitness products are good indicators for the future. The company sees an opportunity to simplify its product lineup, which could help it increase investment in best-selling products such as running shoes and fitness apparel.
There is also untapped potential for Nike to leverage its brand power to capture higher demand at lower prices. Nike plans to launch new footwear products next year with prices under $100, which could help the brand gain market share.
Nike is a large company with deep pockets to invest in new products and innovation, especially in cushioning technology for shoes, while paying dividends to shareholders. The rolling dividend yield of 1.67% is the highest in fifteen years, which underlines the value of the shares at this time.
Nike is making good progress in cutting costs and shifting its product lineup to deliver better growth, but investors should expect Hill to introduce some ideas of his own that could boost investor sentiment and send Nike shares higher in 2025.
2. Roku
More than 83 million households use it Roku (NASDAQ: ROKU) as their TV gateway, and the number of households signing up grew 14% year-on-year in the second quarter. After falling in the first half of the year, the stock is up 24% in the past three months and there could be more room to run.
Roku makes a small portion of its revenue from the sale of streaming devices, but the bulk of its $3.7 billion in revenue comes from advertising and the sale of streaming subscriptions on its platform. The recovery in the advertising market over the past year has benefited Roku’s business, with platform revenue rising 11% year over year in the second quarter.
Roku’s growth could accelerate further in the coming years as management looks for new ways to monetize its users. For example, it uses its own payment service Roku Pay to simplify the sign-up process for premium streaming services offered on the platform.
Roku is also leaning more heavily on partnerships to fuel the growth of its advertising business. It recently entered into a partnership with The Trade Bureaua technology platform that allows brands to buy and manage advertising campaigns. This partnership will help third-party brands get better data about Roku’s viewership, potentially accelerating Roku’s ad revenue growth.
Roku has a lot of untapped potential in a connected TV advertising market that GroupM estimates will reach $38 billion by 2024. Investors can buy shares at a reasonable price-to-free cash flow ratio of 33, which may not reflect the potential for sustained double-digit growth over the long term.
Should You Invest $1,000 in Nike Right Now?
Consider the following before buying shares in Nike:
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John Ballard has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in Nike, Roku, and The Trade Desk. The Motley Fool has a disclosure policy.
2 Comeback Stocks to Buy Before 2025 was originally published by The Motley Fool
